Jp Morgan Sees 50 Bps Drop In Gdp At 4.8%

JP Morgan Securities India Pvt Ltd lowered down its gross domestic product (GDP) growth forecast for the country for the current financial year by 50 basis points to 4.8 per cent. The securities research firm said the overall economic trend is not very promising on the back of slowdown in export, industrial activity and investment "despite the likely positive showing from agriculture and pump priming by the government".

JP Morgan said that before the terrorist attack on US on September 11, India's balance of payment looked contained on the back of decline in the oil import bill despite the weak export performance. The situation, however, has been worsened after September 11, the research firm feels.

It said, "The possibility of contraction in US economy extending through to March 2002 will have an adverse impact on Indian exports while lurking geopolitical risk could lead to a flare up in the oil import bill. Foreign portfolio flows could also be hampered particularly because of proximity to the potential region of conflict." It mentioned that US is the single largest destination for Indian merchandise and software exports accounting for 27 per cent of its total exports in the last financial year.

The securities research firm has revised down its software growth forecast for the current fiscal by five percentage points to 20 per cent. It also said that the weaker consumer sentiment in US will hit India's other major exports -- textiles and gems too.

On the turnaround of the industry, it views, "falling capital goods output, slow credit offtake and weak equity market conditions make sharp rebound in the industry and services a distant possibility."

JP Morgan, however, expects an agriculture resurgence leading to an industrial recovery. But this rural demand-led rebound is unlikely to materialise until the fourth quarter of the current fiscal and will not be enough to push up the GDP growth over 4.8 per cent, JP Morgan said.